Eliminate Compensation Inequality to Help Reach D&I Goals
Inequality in compensation is a recurring issue that causes many problems that work against our Diversity and Inclusion efforts. These real and measurable inequalities lead to higher voluntary turnover as well as employee dissatisfaction and disengagement.
Pay Inequities Lead to Attrition
As an example, I had a co-worker quit who consistently outperformed her peers and enjoyed her over 8 years with the company. She had no complaints about the people with whom she worked; she was even happy with almost all of the managers as well. She found her work interesting, well-paced, satisfying, and allowed her to grow professionally.
Her reason for leaving was primarily compensation. Prevailing industry salaries increased faster than the average yearly increase in the job. She started low and her salary went up slower than other software engineers that job hopped. After eight years, she was getting significantly below what was market rate for her experience and skills. Because the industry average pay scales moved up, new people with less experience started for increasingly higher salaries and bonuses.
This employee made an effort to fix the problem; she brought up with her people manager if her pay was on par with her male counterparts. She was told it “wasn’t good” to ask questions like that and that it reflects badly on her. She didn’t ask again. I hired her replacement after a 3-month search (which pushed out deliverables) at the same salary she should have had all along and then still needed to invest time and effort get that new person productive. Paying her the prevailing wage would have been the smarter and MUCH more cost-effective move.
Not Everyone has Negotiating Skills or Position
It is a common opinion with senior managers and executives that everyone is free to negotiate for a better salary when they get an offer or if they feel they deserve a raise and it is their responsibility to do so. If the employee does not negotiate, it is their loss.
I generally disagree with that view except for senior leaders who are expected to have that skill and to be assertive. I do not expect Software Engineers to have contract or salary negotiating skills; I hire them for software engineering skills. I do expect them to be able to communicate technical concerns related to their position, but I do not expect they can negotiate a better employment deal.
Studies have found that many employees (women, minorities, and people on visas especially) do not always feel like they are in a position where they can negotiate and when they do negotiate, they are often perceived as pushy and it is discouraged. My experiences over the years agree with this assertion.
People often say that it is difficult to compare people directly since they do not have the same skills or experience. I think that is mostly an excuse to justify not having fair and equitable pay scales by making compensation seem like an arcane art, which it is not.
Pay Audits
Part of our D&I efforts should include ensuring we are equitable in pay across all employees and that we recognize and eliminate the practices that lead to unsupported pay differences. It is easy to determine the industry & company salary averages for positions. It is easy to compare employees’ salaries. I’m not saying that we boost low performers or penalize high performers but equal pay for equal work HAS to be norm. We also have to take a look at people that are above or below the median and ask is this the result of a bias and fix issues.
Pay Audit can help to uncover the pay inequities can disproportionately work against or D&I efforts. Additionally, companies can afford a few thousand dollars here and there for equitable pay and cannot afford to not have equitable pay. Just like customer retentions vs acquisition, replacing an employee is multiple times more expensive than retaining an employee.
Do the Right Thing by Choice
Making sure our employees and co-workers get equitable pay is the right thing to do but it is also a legal requirement that can mean fines and legal settlements against companies as well.
· In September 2019 Dell agreed to pay $7 million to settle claims alleging gender and race-based pay discrimination.
· Also in September 2019, Goldman Sachs agreed to pay almost $10 million to a class of about 600 workers to settle pay discrimination claims.
· In February 2021, Google agreed to pay $3.8 million to more than 5,500 current employees and job applicants to settle allegations of pay and hiring discrimination.
Equitable pay is not only the right thing to do morally for your employees, it is the right thing to do for your company P&L. I’d prefer people to do the right thing just because it is the right thing, but I’d take the win either way.
Vice President of Client Delivery
3 年Just post the target salary for new hires and provide raise opportunities based on tenure and willingness to get education / certs for current employees.
From the Rock Query industry to the Solar Energy industry
3 年So let me ask this if you are a person of color and you have more experience, skills, and tenure with a company they do a group promotion and you the least paid and when asking for at least the min of what you know that promotion makes they deny that offer something less then plays around on giving you that until a new caucasian Forman with the company asks for a raise or he quit which just so happens to be what they offered you then you finally get what the new guy got in a week but took you close to a month. Is that pay inequality or you just got to do better?
Technology Executive | 20+ years in IT & Operations | Specializing in Healthcare Technology, Business Transformation, and Team Leadership
3 年Michael, I do agree although the nuances get tricky. Clearly if you are differentiating on race, gender, etc., that is completely wrong. In other situations defining equitable is not as cut and dry. If you erase all disparity you quickly find yourself in the dystopia of Kurt Vonnegut's Harrison Bergeron. Following a merger of two competitor companies, I had two similar teams. One was in the NY metro area with a high cost of living, the other in the rural Midwest with a very low cost of living. The people in the NY office felt they should be getting paid far more than their Midwest counterparts. The people in the Midwest office felt it was grossly unfair if they were being paid less (for the same work) than their NY area colleagues. No matter how you approached it, someone felt that compensation was not equitable. On top of that you then factor in experience (is all experience equivalent?), education (do you pay an MIT grad the same as the Fred's College Grad?), productivity (especially in fields like software where your top people are often 10x more productive than the average). Addressing the issue has to start at the time of recruitment. Companies want to hire the best people for the least amount of money and that inevitably leads to compensation discrepancy. The discussion inevitably starts with the required field on the applicant tracking system asking, "what salary are you looking for" or, "how much do you make in your current position". If equity were the goal, every posted position would list the compensation (at least a range) as part of the job description. The best guidance I ever heard was that if a copy of your company's salaries went public, there should be little to defend or be embarrassed about. How many companies do you know who publish their compensation figures? For most it is a closely guarded secret and employees are admonished not to share any such information with colleagues or others.